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THE KENTUCKY DIVIDE

PHOTO / CONNOR CHOATE


Eastern Kentucky and Appalachia once served as an emblem of Westward extension and the American dream. In more recent years, however, this region of the Bluegrass State has become the face of endemic poverty and social stagnation — a sharp contrast to the wealth in the Golden Triangle. As the gap between the rich and poor continues to grow across the U.S., so too does it expand in Kentucky.



For most of its 223-year history, Kentucky has stood at a crossroads.

When Daniel Boone and his motley crew of pioneers first descended Kentucky’s eastern slopes and reached its fertile valleys, they did so through the Cumberland Gap, a jagged notch in the Appalachian Mountains that stitched together present-day Kentucky, Tennessee and Virginia like a seam. Historians have since named this route “the doorway to the West,” designating it as one of the nation’s earliest emblems of the American Dream.

Today, however, poverty rates in 109 of Kentucky’s 120 counties exceed the national average, according to the U.S. Department of Agriculture’s Economic Research Service. Thirteen counties in Appalachian Kentucky buckle beneath poverty rates that exceed 30 percent. In 2013, one-fourth of Kentucky’s children lived in poverty, according to the Census Bureau’s American Community Survey. Three Kentucky counties — Perry, Leslie and Floyd — have life expectancies that more closely resemble rates in developing countries such as Bangladesh and Algeria than those in industrial nations, according to the Institute of Health Metrics and Evaluation at the University of Washington.

The U.S. Census Bureau recognizes Owsley County, Kentucky, as the nation’s most impoverished municipality. Like many areas of Appalachia, the county of nearly 5,000 people bears the scars of a coal industry in rapid decline. Abandoned general stores pockmark the county’s isolated thoroughfares, and defunct infrastructure stymies commerce. The median household income sits at $18,896, and 42 percent of the residents live under the poverty line.

Kentucky’s regional disparities highlight a trend that has been festering in America for decades: The country’s economic divide is widening, and its middle and lower classes are falling farther behind.

Appalachia’s plight looms in sharp relief to the boon found in the Golden Triangle, an intrastate region that consists of Lexington, Louisville and Cincinnati/Northern Kentucky. The triangle is home to roughly 2.2 million residents and, with more than 2,300 millionaire households within its borders, contains most of Kentucky’s wealth, according to U.S. census numbers.

James Ziliak, the founding director of the Center for Poverty Research, a nonpartisan, nonprofit academic research institute located at the University of Kentucky, credited the Golden Triangle’s growth to the rapid expansion of a skilled, diversified workforce — human capital that is absent in other regions of the commonwealth.

“What we’re missing in Eastern Kentucky is an adequately skilled labor force that makes it attractive for firms to locate there,” Ziliak said. “In Appalachia, there’s a missing market — both the supply of skilled workers is missing, and so is the demand. The whole market is just gone. It doesn’t exist.”

While Eastern Kentucky remains one of the faces of national poverty, the affluence of the Golden Triangle can be seen in the pomp and circumstance of the Kentucky Derby, the legacy of nationally recognized college basketball programs and a thriving bourbon industry. Whether nestled into the meandering banks of the Ohio River or rising from rolling hills of bluegrass, the Golden Triangle’s landmark cities seem worlds apart from Eastern Kentucky.

In actuality, the distance between Kentucky’s richest and poorest residents, Oldham County and Owsley County, respectively, is a meager 115 miles. The dynamic between these two counties may be extreme, but it is indicative of larger socio-economic issues. In his 2015 State of the Union Address, President Barack Obama recognized the growing gap between the top 1 percent and the bottom 99 percent of American society when he stressed the importance of vibrant middle-class economics.

“It’s now up to us to choose who we want to be over the next 15 years and decades to come,” Obama said. “Will we accept an economy where only a few of us do spectacularly well, or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”




STRADDLING THE DIVIDE



The late 1990s to mid-2000s was “the lost decade” for Kentucky’s low- and middle-income households, according to the Center on Budget and Policy Priorities. On average, the state’s middle-class families watched their incomes decrease more than 6 percent. The poorest fifth of households lost even more, 17.2 percent. The richest 20 percent of Kentuckians felt no change at all.

“If you have growth, but most of that growth is through widening inequality, then you may not see a reduction in poverty,” Ziliak said. “And that really characterized much of the 1980s and 1990s. We had growth, but with widening inequality, and so poverty wasn’t changing nearly as much as what you might have expected.”

The average income for Kentucky’s richest 1 percent in 2012 was $685,742, or 18 times more than the average for the other 99 percent, according to the Economic Policy Institute. On a wider stage, America’s wealthiest citizens earned an average of $1.3 million, or 30 times more than their lower-class counterparts. An eight-hour drive further illustrates the national income gap.

Interstate Highway 81-North connects Owsley County with America’s richest township, Falls Church, Virginia. Approximately 10 miles from the nation’s capital, Falls Church boasts thriving information technology, aerospace and defense sectors. It hosts three Fortune 500 companies (Computer Sciences Corporation, General Dynamics and Northrop Grumman) and it maintains a median household income of $120,000 — nearly $100,100 more than Owsley’s, according to census data.

“What we’re seeing is that the rise of inequality is coming from our major urban areas,” Ziliak said. “That’s where a lot of the job growth is concentrated. On the West Coast, you have the technology corridor. On the East Coast, you have finance, and then you have all the insular industries that fall out after those two major sectors. Those are missing from the rural parts of America.” While analysts use various gauges to measure economic inequality, the most accurate are household income and household wealth, said Brian Strow, former president of the Kentucky Economic Association and current BB&T Professor for the Study of Capitalism at Western Kentucky University.

“Household income measures a household’s fluid ability to exercise personal decision making regarding their ability to prioritize and meet their needs and wants,” Strow said. “Household wealth is important because it is a safety net. People with high levels of wealth can continue to engage in consumption by selling assets if their income falls. People with little or no wealth have no personal safety net.”

These two economic measures operate in tandem. Without reliable sources of income, households cannot generate wealth. As individuals’ means of accumulating assets stall, they find themselves either slowing or regressing on the track of upward mobility.

This process has contributed to Kentucky’s current economic climate. Between 1979 and 2012, the top 1 percent amassed 82.8 percent of the commonwealth’s income, the Economic Policy Institute found. In the same time frame, the bottom 99 percent’s collective income contracted by 0.2 percent.

Strow attributed these hardships to contemporary legislation that assists the nation’s wealthiest and poorest citizens at the expense of middle-class households.

“Vibrant middles classes provide a stable market for producers to cater to,” he said. “The middle class are the ones who show up for work — the rich and the poor have lower employment rates — so for economic growth purposes it is important to have a large middle class.”


Income discrepancies have sparked a national crisis of confidence.

Nearly half of the country has lost faith in the American Dream, according to the Public Religion Research Institute’s 2014 American Values Survey.

“Throughout our history, confidence in the future has risen and fallen in response to changing circumstances,” Bill Galston, senior fellow of governance studies at the Brookings Institute, wrote in his analysis of the poll.

The American Values Survey highlighted such public ambivalence.

Nearly 72 percent of respondents believe that the country is still in a recession, which economists classify as two or more consecutive quarters of a declining Gross Domestic Product. The Great Recession, which began in late 2007, officially ended in June 2009.

Survey participants overwhelmingly reflect society’s enduring uncertainties. In Kentucky, the bottom 99 percent’s sluggish income accumulation has created a disconnect between perceived economic recovery and reality.

“A full five years after the recession officially ended, Kentuckians should be feeling better about their economic condition, but the recession was especially deep and Kentucky among the states harder hit,” Jason Bailey, director of the Kentucky Center for Economic Policy, wrote in the introduction of “The State of Working Kentucky: 2014.”

Job loss during the Great Recession particularly hindered Kentucky workers under age 25 because they often lacked experience, Bailey wrote. The study also found that African-Americans and individuals with lower levels of education were significantly affected as they sought new employment and sources of income.

This pattern, characteristic of life in Eastern Kentucky, feeds the income gap: Education, health and employment rates plummet. Crime rates soar. The physical, mental and emotional costs of interrupted economic mobility begin to fester.

“There are more people dying of overdoses of heroin in our state than there are auto accidents,” Ziliak said. “I would certainly say that a lot of it is economic loss, economic dislocation. Drugs are often an escape from that hardship.”



TIES THAT BIND




“In the next decade, something must give,” authors of the Economic Policy Institute’s report on income inequality concluded. “Either America must accept that the American Dream of widespread economic mobility is dead, or new policies must emerge that will begin to restore broadly shared prosperity.”

Strow, the Western Kentucky University economist, said the key for Eastern Kentucky is jobs. The only other option is for people to move.

“That begs the question, ‘How do you attract industry to a region?’ It is a combination of highly skilled workers, good infrastructure, low taxes and low regulations,” he said. “The lack of highly skilled workers and a geography that makes infrastructure investment expensive places Eastern Kentucky at a competitive disadvantage.”

Ziliak echoed Strow’s sentiments.

“The state needs to invest in the people in terms of education,” he said. “Some people will take that education and choose to move, and they won’t necessarily ever return. Others will choose to stay in the area and invest. Doing nothing will lead to more of the same.”

Prior to his 2015 State of the Union, Obama unveiled the Promise Zone Initiative, a program that hopes to revitalize America’s middle class by “partnering with local communities and businesses to create jobs, increase economic security, expand educational opportunities, increase access to quality, affordable housing and improve public safety,” according to statements from the White House.

In January 2014, the administration demarcated the first five of an eventual 20 Promise Zones. Southeastern Kentucky was one of them.

“There are communities [in Kentucky] that have been struggling for decades with shutdowns and layoffs,” Obama said during a speech in the East Room on Jan. 19, 2014. “They’re taking steps — locally initiated — to track new businesses and create new jobs in new industries. They’re stepping up to expand technical training and help more kids get a higher education. We will help them succeed. Not with a handout, but as partners.”

The zones — which also included San Antonio, Philadelphia, Los Angeles and the Choctaw Nation of Oklahoma — put forward plans that hoped to draw support of local business and community leaders, encourage investment and expand economic opportunity.

Ziliak, though, warns the plans amount to an unfunded promise.

“The Promise Zone didn’t have any direct appropriation attached to it,” he said. “What the Promise Zone entailed was a commitment on the part of several federal agencies — education, agriculture, in particular — to give the region a leg up in competing for federal grants.”

Since the initiative’s implementation, Ziliak has helped the state apply for and receive two grants attached to the Supplemental Nutrition Assistance Program (SNAP) that totaled nearly $20 million. The awards will help fund projects in the Promise Zone, Ziliak said.

“I don’t think the state would have necessarily won those grants — they were competitive across the country,” he said. “I think having the Promise Zone was icing on the cake.”

The Kentucky Highlands Investment Corporation, a company founded in 1968 to stimulate growth and create employment opportunities in Southeastern Kentucky, is overseeing Promise Zone operations in the Bluegrass State. The business outlined a recovery plan that focuses on diversifying Southeastern Kentucky’s economy, generating growth within the small business sector, creating leadership training for youth and initiating college and career readiness programs for high school students.

“Together, let’s do more to restore the link between hard work and growing opportunity for every American,” Obama said in the 2015 State of the Union. “That’s what middle-class economics is — the idea that this country does best when everyone gets their fair shot, everyone does their fair share, everyone plays by the same set of rules. We don’t just want everyone to share in America’s success,” he added. “We want everyone to contribute to our success.”



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